The wireless industry has experienced dramatic growth over the last few decades. Competition among the top four players (Verizon, AT&T, Sprint and T-Mobile) is fierce as they try to expand and upgrade networks, add to their subscriber base and grow operating margins. Carriers seem to be making some headway with reducing customer churn, but these customers they’re fighting so hard to keep are becoming very demanding about access to affordable, unlimited data plans. This, among other factors such as significantly slowing growth in the US market, is affecting the bottom line.
In reaction to the slowing revenue growth, some wireless companies have sought other revenue streams. For example, AT&T purchased satellite pay-television provider DirecTV in 2014. Not only did this add new revenue to the books, but it put them in the highly desirable position of being able to bundle phone and TV services.
Verizon took a different approach to revenue diversification when it purchased AOL. This represented a move to get into online content and reap the associated ad revenue. Similar motivation seems to be behind their current efforts to purchase Yahoo.
By going after ad revenue, wireless carriers are entering territory dominated by businesses with whom they have a sometimes dysfunctional yet mutually beneficial relationship – social media companies. On the one hand, companies like Facebook and Snap depend on mobile carriers’ robust wireless networks to support their content and user base. Additionally, smart phone capabilities, especially cameras, drive social media use. Conversely, the quality of content offered by social media sites drives smart phone and data plan usage. The two industries have helped fuel each other’s growth.
However, while the two industries often benefit each other, it is a sometimes contentious relationship. For example, introduction of messaging capabilities within social media sites impacted mobile carriers’ SMS revenues. Additionally, as social media companies want to add more video capabilities and are exploring things like virtual reality, they demand more and more of wireless networks.
It’s no wonder some mobile carriers are eyeing the digital ad revenue that social media companies depend on. There’s a lot to be had. In 2017, Facebook pulled in $40 billion in ad revenue, making it second only to Google. Snapchat, although much smaller, is starting to hit its stride. It earned $824 million in ad revenue in 2017 and is expected to see a healthy increase to $1.5 billion in 2018. All that ad revenue is made possible by something currently controlled by the wireless industry – the mobile camera.
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